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SPAC
Overview
What is a SPAC? Trading Mechanism of SPAC SEC Filings of SPAC Advantages and Disadvantages of SPAC Valuation Process Performance of Chinese Companies Conclusions
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What is a SPAC
SPAC--Specified Purpose Acquisition Company
organized for the purpose of effecting a merger, capital stock exchange, asset acquisition or other similar business combination with an operating business in a specified industry. A corporation formed by private individuals to facilitate investment through an initial 2/17/13 public offering (IPO). The proceeds are used
What is a SPAC
Similar to a Blank Shell Company
A new shell company is a company that
exists but does not actually do any business or have any assets
Shell companies are often formed by
individuals and businesses to conduct legitimate transactions, such as domestic and cross-border currency and asset transfers, or to facilitate corporate mergers and reorganizations. Company of its own
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What is a SPAC
Issue common stocks or units to qualified investors
SPACs trade as units and/or as separate
sold in $810 units which consist of one common share and one warrant.
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What is a SPAC
No operation
the Shell has never had business in the
past
The Shell does not have any assets, or
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What is a SPAC
Limited Life Charters
Must sign letter of intent for a merger or
acquisition within 12/18 months of the IPO with transaction close within 24 months.
Incorporated with 24-month limited life
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Trading Mechanism
Shell Company Investors
Investment Banks
Target Company
Stock Exchange
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Trading Mechanism
The Unit
A $6.00 Unit consists of one share of
Common Stock and two Warrants. Common Stock and one Warrant. Common Stock and one Warrant.
A $8.00 Unit consists of one share of A$10.00 Unit consists of one share of Each Warrant entitles the holder to
purchase one share of Common Stock at 2/17/13 a price of $5.00, $6.00 or $8.00.
blank check company deposit the securities being offered and proceeds of the offering into an escrow or trust account pending the execution of an agreement for an acquisition or merger. release of the offering funds in conjunction with the post effective acquisition or merger
Notable:
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SPAC - Advantages
Comparison with IPO:
Lower capital requirement (less than
$5M)
Shorter period (1 year less than normal
IPO)
Able to control the risk Lower costs/fees (1/5 of normal IPO) New entity could also engage in RM
SPAC - Advantages
Comparison with RM:
No debt and legal issues with Shell check
companies
Higher cash level Raise more money than reverse mergers
at the time of IPO (Average $115M V.S. $5.24M through RM) reverse mergers
SPAC - Disadvantages
Lower IPO price for Shell check company The initial company could not directly get
listed on Nasdaq
Main investors are PE and hedge fund Dilution due to management and sponsor
shares (20%)
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Why SPAC
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Comparison
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Valuation Process
The model we use
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Valuation Process
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Valuation Process
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Valuation Process
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Conclusions
1. More of arbitrage instead of growth 2. Companies have to balance between the
skills
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